Does a Dell Buyout Make Sense?

On the face of it, a Dell buyout makes sense: The company has been languishing for years, and the era of the PC is clearly on the wane. Consider that it took revenue of $13.7 billion for Dell to make profits of $589 million in the last quarter.

Dell’s core desktop PCs and mobile computer divisions are both shrinking in the face of demand for the iPad and Android tablets. Even worse, PC shipments are on an incredible downward trajectory. Research firm Gartner said worldwide PC shipments shrank 4.9%, while IDC reported worldwide PC shipments shrank 6.4%, in the third quarter this year when compared to the same period a year earlier.

Only Dell’s servers and networking division is growing, but the company must fend off cloud-based computing competitors such as Amazon.com.

Perhaps now is the moment to buy out the current shareholders, strip the company of costs and run Dell for cash.

A deal would be somewhat easier to complete given Michael Dell’s 15.7% ownership in the company.

But:

This is still a massive acquisition, one of a scale that we’ve not seen in the past five years.

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